Hockey pledges to loosen reform screws

The federal Coalition has told major banks to expect a reprieve from regulation should they win office, tapping into discord about the weight of new rules on the banking sector, including the sweeping Future of Financial Advice changes.

In the past three months, Shadow Treasurer
Joe Hockey
has held meetings with each of the chief executives of the four major banks. He promised a Coalition government would slow the pace of regulatory reform, making no new announcements until the completion of a comprehensive review of the financial system in the style of the 1997 Wallis Committee.

Despite healing a rift with
ANZ Banking Group
chief executive officer
Mike Smith
– who last year likened the shadow Treasurer to Venezuela’s socialist President Hugo Chavez – Mr Hockey is yet to convince the major banks to publicly endorse his call for another inquiry into Australia’s finance system.

A spokesman for Mr Hockey, who is in Hong Kong, said the financial services sector was within its rights to complain about the amount of new regulation.

“The Coalition wants to give certainty and stability to the banking sector and end this piecemeal, ad hoc approach that they are currently being subjected to," he said.

Mr Hockey’s meetings with banks comes as they seek to reduce the scope of the FOFA reforms. Those reforms are aimed at stamping out conflicts of interest amongst financial planners but their implementation may affect banks more broadly.

Sandy Grant, a retail industry veteran and chair of Industry Fund Services, claims banks and major financial retailers are attempting to undermine proposed advice reforms by slowing their introduction until the Federal Government loses power.

Mr Grant, who is also an employer representative on the board of CareSuper, claimed he was “astonished" the Finance Industry Council Australia (FICA), an umbrella organisation representing banks, insurers and fund managers, had written to the government seeking carve-outs and changes to planned reforms. A copy of the letter was obtained by The Australian Financial Review.

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Mr Grant said: “There is a grave risk of a token response or a return to the status quo.

“It is much, much easier to run a profitable business if investors are paying a commission stream, often without their knowledge."

He accused the sector of attempting to “filibuster" the reforms, where stalling tactics are employed to postpone a vote.

“There is a sense that if they can hold up the process long enough, then there will be a change of government and ‘future of financial advice’ will not be implemented."

FICA chairman
Duncan Fairweather
denied the charge.

“I have not heard in any discussion that agenda," he said.

“Some concerns arose about the scope and breadth following the publication of draft legislation."

A wave of regulation has been a repeated complaint within the banks. The creation of the national consumer credit laws created new rules obliging banks to assess and verify a consumer’s financial circumstances before offering them credit.

Banks have had to review their consumer contracts to ensure they do not contain unfair terms and face new laws to outlaw anti-competitive price signalling.

Banks are also grappling with new offshore regulations, including the Basel III rules, reforms arising from the Group of 20 nations such as the need to draw up “living wills" and the US foreign account tax compliance law.

Australian Bankers Association, chief executive officer Steven Münchenberg said when the Coalition had asked him what the banking sector would find most useful, he replied: “a break from the rapid rate of national and international regulation we have to deal with."